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World's top stock is Indian brokerage with almost 900% gain

Fri, Aug 18, 2017 - 4:33 PM

[MUMBAI] The bull market in India has produced another record: the world's best-performing stock among companies that have a market value of at least a billion dollars.

For most of its life the brokerage Indiabulls Ventures Ltd wasn't even part of that club. An 870 per cent rally this year has revitalised a stock that was listed in 2008, sunk as the financial crisis hit and then didn't do much until 2017.

The shares are commanding a premium, according to Indiabulls Ventures, because of its foray into consumer lending, where it caters to salaried and self-employed consumers.

The company's traditional business - it was a pioneer of online trading in India - is benefiting from mom-and-pop investors flocking to the record-breaking stock market.

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"The underlying businesses are changing," said Ankit Surana, a credit analyst at Brickwork Ratings. "The entire investor expectation is riding on the higher returns a non-bank finance company earns, compared to low margin, fee-based incomes that research, advisory and brokering firms typically make."

Existing and new shareholders have signaled bullishness by buying shares directly from the New Delhi-based company, which is part of Sameer Gehlaut's Indiabulls finance and property empire. Profit for the three months ended in June more than doubled to about 503 million rupees (S$10.7 million) from a year earlier.

Indiabulls Ventures has market value of 88.1 billion rupees but there's no fundamental research tracking the company, according to data compiled by Bloomberg. One reason may be that it's not a particularly liquid stock with a free float of 31 per cent. The shares fell 2.1 per cent to 199.2 rupees at 1:39pm in Mumbai, halting a three-day gain, amid declines in the broader market.

Trading in the stock drew inquiries from authorities, the Business Standard newspaper reported last month, citing people familiar with the matter. Indiabulls Ventures said the report was factually incorrect, adding it hasn't received a notice from the Securities & Exchange Board of India and that it complies with all regulations. SEBI didn't respond to requests for comment.

A handful of Venezuelan stocks show higher returns than the Indian company but their performance and valuations are skewed by the bolivar's overvalued official exchange rate.